anna: chinese manufacturers and stabilizing after a three-year low, stimulus measures show signs working. guy: confidence among japanese manufacturers worsens as fears grow. stocks in tokyo bounds. anna: twitter spike, shares jump as rumors surrounding jack dorsey being named. countdown.e to anna: a warm welcome to the first hour of the program. a few things to get through this morning. you were talking commodities, a lot. it has been something of a
story, a little bit concerned about it. those factorsof in the mix. anna: we do not need to revisit the fact we saw all materials down 40% in the last quarter. a little bit of a bounce in copper of days or so. extending that bounce after we had the chinese data, at a one-week high. before you get too excited, morgan stanley talking about the worse to come -- something we heard from citigroup earlier. guy: not good news for ivan blazoglazenburg. we are watching the credit story, it is one of the factors that honestly has been behind the equity market rally. markets beingt
used as a way to generate buybacks. they elevate equity levels, and if that story stops spinning, because have a problem. but a bounce in copper, most things have come back. let me show you the crossover index, this is the story -- credit has been signaling a much longer term concern being priced in. we saw a big selloff, that is glencore and a number of factors in their. we did see a big bounce, but nevertheless, the credit story has been a factor for a while now. maybe a leading indicator for what is happening with the stock story. be concerned maybe as we start the new quarter. holiday,is a chinese and it is a week-long national day -- getting a week holiday for a national day. equity markets in china out for a bit. guy: japan is back, we will talk about it a lot. the twitter question today is the fourth quarter. please let it be better than the third quarter. someone argue that we had a torrid time.
anna: we saw u.s. stocks bouncing little bit yesterday, advancing and closing a little bit higher. but the rebound on the last trading day of the quarter was nothing close to a recovery for wall street after the worst three-month rout in three years. stocks finishing up a dismal quarter, their worst in four years. the s&p, doubt, and nasdaq all falling around 4% against their worst performance in 2011. there were really three primary groups, though the selling was widespread. three groups that were largely responsible for the crime. energy, materials, and health care. energy and materials having to do what happened in the commodities market. and a big selloff in biotech and health care in the wake of hillary clinton tweeting that she wanted to cap prescription drugs. moving on to commodities and what we saw there, gold experiencing its fifth straight quarterly line. that is the worst streak since
1998-1999. oil having a terrible quarter, down 20%. copper pulling back sharply. as that was going on, the dollar actually did relatively well -- of by nearly 1% versus a basket of currencies. really interesting trading in the 10-year note. that is, treasuries to drink a big month. we heard officials say there was a likelihood that we would see rates go up by the end of your. on the quarter, by the time all is said and done, the yield on the note had gone down the most since the second quarter of 2012. that idea that we would see rates go up by the end of the year, more things to reflect over the concerns of global growth. guy: julie hyman joining us from new york. what a month, in terms of what the futures of the pricing, pointing to a positive opening on wall street when it opens on
the first in the quarter. anna: china and hong kong markets are closed, the rest of the asian markets are trading. let's go to juliet. juliet: it certainly is, anna. we started off a new month and a new quarter here in asia with some good gains coming from the back of that late rally we saw in the u.s. we survey saw good gains from taiwan, up by 1.5%. the manufacturing gauge as well was above expectations. a lot of focus on the survey which came through, showing a bit of stabilization in the manufacturing sector which has really boosted sentiment securely in australia. up by 1.9%, and base metals rising in london during a decision yesterday, that is helping out a lot of the players. and japan up by 2.3% in the afternoon session, we have just under an hour left in japan,
korea, and is brilliant. that is despite the fact that we have the survey for the third quarter in japan coming through. it did miss estimates coming in at the reading of 12, as opposed to 13. a pickup in japan, korea also had a fair amount to a just today. certainly, things looking strong for the first trading day of the month. i will have a look at the major stocks that we have been watching in the asian region, minerals and australia and the private equity firms picking up by 10% -- sending all shares to the biggest surge in 20 months. the commonwealth bank, and the second largest company by market cap in australia lifting the region. in japan, the lifting really being done by mitsubishi and toyota. both are lifting the index, but japan which we were talking about yesterday, still under intoure by more than 3%
american spirit tobacco. the market does not see the like that. but certainly a positive start to the new quarter here in asia. anna: juliet, thank you. joining us from hong kong. guy: off on the right foot, let us stay in asia. index, large manufacturers fell to 12. this is from december and a reading a 15. it is still a downward project three, a growing concern that the economy may have contracted in the quarterj that is just ended. ./ james: there are two main factors that are causing them to be less confident. the first is the terminal deal with china, exports fell in august. it is where the survey was conducted. and you also saw a total after the yen devaluation, and that is
really affecting. also exports to other southeast asian nations, concerns over their economies. the other factor is the domestic economy. while the best economy, there is a concern of recession, one of the factors and that is weak domestic spending. they're not buying cars, industrial goods, or refrigerators or televisions. that is playing into weak demand, playing into and pushing down manufacturers like toyota or toshiba. pushing down their confidence in what is going to happen the next month. anna: falling confidence then as we saw in the survey. the industrial output, where storyhis leave the growth and the inflation story in japan? james: it is not in a good position. i mean, if the economy get contract in the third quarter -- which is what a lot of economists are saying after the data yesterday, the minister has
been in power for 11 quarters. and the economy only shrunk in five. coming in to fix the economy and the deflationary malaise japan was under, it has not hand out. you have not seen steady growth. steady losses like before he came to power, the real question is what does the government do about that? bank of japan do? before governor corona came to power, which is maybe one of the reasons why the stock market is rising, will the government have a fiscal stimulus package? will there be a stimulus this month? the majority of economists we speak to say it will stimulate the economy, whether it happens this month, that is a different question. government advisers have been saying definitely there will be a feminist package, they're worried about how much it will be. those two factors are what are
going to happen in the short term for the economy, whether that will be enough to put it on a proper growth path or not, that is another question. guy: james, glad to get your take. joining us out of tokyo. : later this hour, we speak to a former official from the ministry of finance. that will be at 6:45 in the morning. guy: that is a cool name. out ofre the markets asia, let's take a look at european data. what are we expecting? manufacturing in the eurozone, the first reading of spanish pmi for september, and we get the number from italy. later, we get the aggregate number. the core and the thinning to the periphery, you get italian data coming through and you aggregated into the bottom number down there at 9 a.m. u.k. time. twitterver in the u.s.
shares spiked after the company will welcome jack dorsey back as the permanent ceo. can he resuscitate confidence in the social media network? caroline hyde, she is with us with the details. favoring continuity over a fresh face. caroline: the return of the man originally ousted back in 2008. could jack be back? that was the headline across the bloomberg terminal yesterday. that is what set the shares higher. dorsey could be appointed permanent ceo. remember, he was interim ceo for more than three months now. he could become permanent ceo as soon as today. there are still a few caveats. saying that at the moment, they need to be really signing the under operating roles, they need clarity there on the roles of coo. the likes of cfo like the to
stay there. the top players back jack dorsey. at the moment, all bets are on jack dorsey returning as permanent ceo. he has indeed been interim ceo since june. here is the internal candidate -- the issue was, he was already ceo of another company. the company that he helped cofounder, keeping himself busy, and that is square. we understand that he would remain chief executive of square. which is interestingly readying aself to sell shares as soon this year. so clearly, there is still much to be really confirmed. it looks like jack is back, and what does he have on his plate? this is a company that at one point saw shares spiked at 1.5% after hours. it is because they saw their he
near record lows in august, we hit a record low for twitter yesterday. hope thathed on the jack dorsey could be a visionary and roll out new product. us have a look at the new ones they have brought out. --far, we had the e-commerce that by button is going to the masses. millions of businesses are going to use that, not just twitter etc. you have polling, political donations, reports you can tweet more than 140 characters. that is a new one being discussed. how much will that help beef up the user base which is just 360 million, compare that to facebook 1.4 billion. this is the european story. i want to describe it to our viewers this morning, luxury hotels that you can get at a bargain if you happen to be of look to get that deal and you remember. it has been on the path since a got funding itself, by german rivals.
this is going to add about half a million users to the base, in already has 19 million users -- 2 million from germany. it is trying to beef up, the second-most popular destination after spain. the reason they got the cash, they get funding from google and the likes of octopus. now they want to beef up in europe, and they already made an acquisition in poland. now they are making it in germany, and the plan is to keep on rolling out in europe. looks like we could be seeing even more in our direction, if you happen to be on that particular user base. anna: caroline hyde with the latest. guy: what we can expect out of asia, we should be hearing from the chinese leadership we think in an address during the 66 anniversary of the people's republic of china. we think that will happen around 12:30 u.k. time. what policy announcement surrounding that? anna: the already heard from the
chinese premier during the celebration. his message on the anniversary is not easy keeping china's growth on track. >> as the world's second-biggest economy, it is not easy for china to maintain a growth rate of around 7% on what is a $10 trillion gdp. it makes them even more challenging to build a better futures from this point. anna: as he cautioned on the growth, we had a fair share of warnings. the imf chief said growth is disappointing. we will break down her comments, coming up next. ♪
49.8 in september, it was 49.7 in september. equity futures gained on the news. china and hong kong exchanges are closed today. guy: confidence is falling in japan, the latest survey from the central bank shows the index for large manufacturing fell in september from 15 in june, adding to the bad news. the strain on the economy may have contracted in the quarter, which just ended. it was send it back into recession. anna: speculation is growing that the twitter board is set to name jack dorsey as permit ceo. it gained 5% on the news. announcements could come as early as today. you needdo you think to think about christine lagarde? it is all about china. and she says global growth will only moderately exhilarated here as the world grapples with the fed hike. china.wing growth in
speaking in washington left my, she said china faces a delicate task of moving to a new growth model. christine: china is in the midst of a fundamental transformation, one and has been called for an expected by many. it has launched deep structural andrms to list incomes living standards of the violation. these reforms are by design. they will lead to a new normal of slower, safer, more sustainable growth. china's policymakers are facing a very delicate balancing act. they need to increment these difficult reforms, which they have embarked upon with political determination. to stay the course, while at the earning financial stability. investors were worried about the speed at which china's economy
was slowing. these concerns, the investors concerns, but further pressure on commodity markets and triggered sizable currency depreciation in a number of exporters -- securely in latin america. but as it invests less, china is getting to purchase more of the commodities. this will come in our view, contribute to what could be a prolonged. ed. a commodity prices that will be lower. anna: and our next guest says it has been known for a while that china cannot continue to grow using the old model. what is being missed is the speed at which china is climbing the value chain. let us discuss that now with douglas morton, head at deviant global. let's talk about china moving up the value chain, reaching what you call a lewis point. and explain the significance.
las: by definition, as china rebounds, they disproportionately impact the primary and secondary demand indicators. the things we usually look at will be disproportionately affected, for example, twice the amount of energy per gdp dollar of any country. which they're doing on the treasure industry now cannot apportion gdp the first time. we will have headline weakness. what is happening at the detail at the moment, and we see this both from u.s. and domestic result, the rebounding in terms of the consumer -- it is performing well, versus the rest of the economy. but particularly, the competitive environment within china is changing dramatically. so china now spends more on research and of element for the first time in history. we are seeing them internalize research and development, and
there is different indicators. and the lewis point we talk about, basically, when you no longer have a competitive advantage in low value many factory. and china needs to climb up the value chain in order to revamp the economy. that seems to be happening a lot faster. guy: overlay that on the day-to-day. douglas: although we had a stabilization on pmi, the real increases in price, by all gauges, is not only a very strong indicator of future demand going forward and potentially the simulation that is in place, and also it is an top growththat the may actually be starting to move. despite the fact that we have seen these indicators within the detail of gdp slowing being very positive, the top line outlooks like it will destabilize not improve.
we see that impact is deliver ies, also sales are serving the cap now. anna: you mentioned auto sales. why are we seeing, are we backward looking that we think the auto picture is giving us something blooming. i understand what you are saying about the rebalancing, surely they will be telling us the macro picture is not indicative of there may be good experience. douglas: i think you need to separate the commentaries. inking at individual results global companies selling into china, it is indicative of a general slowdown in demand. this is not the case. we have had structural changes, before china's internalizing research and development. basically, onbers their own admission, the reason
there has not been a slowdown is because they're no longer using chinese inputs. they're using other inputs, the other industries have had issues with luxuries in china. they're not necessarily good indicators of the general consumption environment into a. of the initial stages of reform, of which -- guy: but things are not looking as bad as we thought. if that is the case, why are people talking about further stimulus being announced later today? douglas: the first thing, for the reform enhancements rather than just risks. on top of that, the stimulus that we talk about is not necessarily the way and western commentators think. ratio'srve requirement in the banking system are the highest in the world. a lot of people think that is to constrain growth. in actual fact, there is an argument to say that the reason
they're there is order to keep them in check. starkly, they have been holding back liquidity. therefore support the growth model that they have utilized historically to grow. now as that changes, as they move away from export driven growth, no longer need these. the reforms become a matter of whether they need them or not? anna: you do not think they will use that to drive export growth? douglas: i was astounded to the reaction at 3%. of thehe personification reform agenda that the chinese government has been forward. they will support it in the medium term. and the longer-term outflows will see. anna: douglas morton, thank you for joining us. guy: goodbye hong kong, hello tokyo. we will look at why consumers are switching their holiday destinations. anna: plus, vladimir putin's plans break international plans
anna: welcome back, 6:3011. here are the stories you need to know. stabilized 49.7 in august. china and hong kong though close today because it is a holiday. anna: confidence falling in japan, the latest survey shows the index of large manufacturers fell to 12 in september from 15 in june. adding to the bad news, insert is growing that the economy may have contracted in the quarter that just ended -- which would
put the nation back into recession. guy: is jack back? speculation growing that twitter will name cofounder jack dorsey as permanent ceo. with the 5% overnight news, an announcement could come as early as today. anna: china's recent stock market turmoil has put a damper on spending. millions of tourists are suspected to be on the move to celebrate golden week -- an annual chinese holiday. where they are going has changed? . >> hong kong was a mecca, but the local currency is pegged to a strengthening dollar. just as retail performance in the city will remain weak as chinese consumers switch to earn their destinations, especially japan and south korea. a weaker yen makes japan more affordable, and visitors more
than doubled to record. korea, meanwhile, remains a key destination for young people for cosmetics and fashion. and chinese tourists are expected to jump this holiday season. bookings during golden week are up 30% on the year, they have been unaffected by the market rout because travel plans were made months in advance. kong,tailers here in hong local shoppers are expected to fare better than the tourist peers. one retailer gets more than 60% of retailer from hong kong residents. andould still be action other sectors and mass-market jury. bloomberg.com. guy: let us stay with the chinese thing. says it is low in the short term. he is chris wiese senior adviser -- he is credit suisse senior
adviser bob corker. parker. how bad is it? give us context as to how we should receive the china story? bob: before we get into how good or bad, let's start off with some points about structural change in china, and the sense that economic model has fundamentally changed from a manufacturing export led model. the areas of growth now are what i would call midmarket consumption, not luxury consumption. that being hit by the attack on corruption. but you are seeing clearly midmarket consumption growing and also the service sector is growing rapidly. and if you look at retail spending, the latest data, and i think this will continue, retail spending is growing at over 10% year on year. i think we will see ongoing numbers for consumption at 10%
plus. infrastructure investment spending is growing at no close to 16%. addition,y i think in i think we will get further taxation of monetary policy, i think you also get some relaxation in fiscal policy. i think that yes, the chinese economy is mobilizing. but don't think we'll get a hard landing. anna: why would we get that relaxation you mention if things are not as bad as maybe the manufacturing data -- bob: the bad news now, as you mentioned earlier on, there has been a hit to sentiment on the bursting of the stock market bubble. theink if one looks at stock market bubble, one goes back to june this year. the chinese market was an absolute classic bubble. that has burst. we all know the shanghai composite is come down from a peak of 5000 to where we are now
at 3000. i think we settled at around this level, so i think a period of consolidation has had a negative impact. ignore the pmior th numbers. the official numbers are still below 50. industrial production is only growing at 6% year on year. the conclusion from all of this is that a further relaxation and monetary and fiscal policy is required to answer your question. essentially, to underwrite that slower growth. you know, i think what the chinese authorities are very concerned about is i think they accept that growth will be tough. what they do not want is a move down to 5% growth quickly. 5% perhaps in three years time is accessible. not today. guy: so janet yellen can raise rates.
bob: i think she will. you have the speech in boston briefly, you had four other federal governors giving strong signals that the rate will be increased in december. i speak to my view that over the next year, we will get the slow, gentle increase in the fed funds rate. this time next year, i think it will be between 1% and 1.5%. it will be a very slow process. anna: anybody who says it will be one and done for china, it will be back in for some sort of global recession, you think that is overplaying it? bob: completely, there has been a lot of comment by analysts about the slowdown in growth. i think the answer is growth is ok. we look at the outlook, it is plus or -2.5% led by consumption.
midmarket consumption is still a strong, led by germany and spain, it will accelerate. one area where analysts are getting it completely wrong is they are underestimating the very positive impacts on consumption and growth from low commodity prices. when you fill up your car today with petrol, you have not got a diesel -- guy: she doesn't have a car. anna: you wrong person. bob: if you did have a car, it would be a tax cut. anna: i remember the feeling. bob parker stays with us. called for a putin coordinated response to syria, before launching airstrikes yesterday. doubts overuse cast the efficacy of military action. >> there was agreement on both parts about the need for a political solution to the problems that are plaguing
syria. that means that russia will not succeed in imposing a military solution on syria anymore than the states was successful in imposing on iraq a decade ago. ryan chilcote is here. things were quick, to this off guard. ryan: we had a stealthy buildup of russian forces. attack helicopters, and we had the russians quickly move through the formalities of preparing for the action. russian president getting from thepermission upper house of the russian parliament yesterday. ns one hourhe russian notice. then they hit. this completely change the conversation at the united nations for the generalissimo. tomorrow, he will meet angela merkel and francois hollande.
others posted be talks about the ukraine. i cannot imagine how they will get together without angela merkel and francois hollande went to talk about syria now. this is really to mix up. i figured out this is actually the first time we had a russian airstrike since the collapse outside of the soviet union. the remark will stuff, and if we could go into history for a second, the last time we actually saw the russian military moving outside the former soviet union, it was june 11, 1999 -- when we had the russians quickly sees the airport at the end of the kosovo war. to everyone for a loop. no one knew what to do, and that was resolved quickly. but the russian military is very different than what it was then. that was boris yeltsin, now we're dealing with vladimir putin. this is a larger problem for the west. guy: and 20 seconds, the targeting is interesting.
ryan: the wall street journal reporting that u.s. officials are saying he is going after everybody but the islamic state, including cia funded militants fighting isis. anna: ryan chilcote with the increasingly complicated picture. guy: after the break, we look at the challenges facing prime minister shinzo o. ♪
guy: six: 43 in london. these are the stories you know this morning. factoryina's official gauge stabilize after a three-year low. the managing index kind of 49.8 in september. it was 49.7 in august. futures gained on the news. the exchanges are closed for holiday. guy: the twitter board is set to name jack dorsey as its permanent ceo. the company shares gained more than 5% on the reports.
announcement could come as early as today. anna: confidence is falling in japan. latest survey shows the index for large manufacturing fell to 12 in september from 15 in june. adding to the bad news, concern is growing that the economy may have contracted in the quarter, the just ended. it would put the nation back in recession. guy: for more on that story, let sakakibara.isuke financeer japanese minister. still with us, bob parker. good morning to you, sir. is japan back in recession? eisuke: hello? i cannot hear you. guy: can you hear me? eisuke: yeah, ok.
guy: let me ask a simple question. do you fear that japan is back in recession? suke: i do not think so. althink is needed neutrra manufacturing sectors. i think it is in the process of slowly recovering. butrecovery is not strong, it is still in the process of recovery. anna: if we are in a slow recovery then, professor, why is the japanese corporate -- is the japanese corporate world want to start spending, start investing anytime soon? eisuke: i cannot hear you well. guy: are we going to see more investments coming through from japanese companies? it indicates a level of depression amongst large companies. isuke: japanese manufacturing
nofidence, as i said, manufacturing sector is doing well. result is not an indication that the japanese economy is going into recession. 205 isd growth rate for only 1%. we had a negative rate and 2014 because of the tax increase. although it did not slow it is in recovery. we are not growing into the recession again, no. anna: do you think, professor, that the companies will start investing again? eisuke: it may take some time. the monetary policy, again, last year -- it will probably have an impact slowly. investment may be
coming,, you know, some time later. japanese corporations have a lot of trust in him at the moment. they have not invested rightly. but it may take time. eventuallysing may have an impact. bob: i tend to agree with that. i would emphasize the amount of stimulus was being thrown at the japanese economy, i would argue that the japanese yen now is one of the more undervalued currencies in the world. over the next six months to one year, it should feed into an improvement in export led growth. we have low unemployment. wages are creeping up. i think the consumption numbers will be consistent with the growth rate between 1% and 2%.
japanese quantitative easing possibly will increase. verye already have qe significant, taking the balance sheet to 85% of japanese gdp by the middle of next year. professor, given the fact that we have already had of isicant qe, using the this going forward is to be on a more fiscal footing? eisuke: pardon me, i cannot hear you? do we need a fiscal stimulus? guy: do we need to rebalance the stimulus effort towards the fiscal side? eisuke: there may be a compilation of company three budgets. that would be the fiscal stimulus. but the problem with the japanese fiscal condition is that we need the condition -- related that is huge. so that we cannot continue on the relating on the physical side. so monetary policy is achieved.
anna: would you say that abenomics has been successful, professor? eisuke: pardon? anna: do you think that abenomics has been successful? in 2013, they implement the easing of monetary policy. that has worked. that has raised the growth rate in 2013, from the negative rate over the past three years. however, because of the increasing consumption tax and 2014, the economy will sag again. the bank of japan has eased monetary policy again last year. know, 2015 -- this year is the key sort of period.
and i think the japanese economy will grow at 1%. i am forecasting around 0.8% if we could grow at 1%, i think we should be happy. 1.5% growth is alright. guy: professor, thank you very much indeed for your time. anna: bob parker is still with us. you were giving us your thoughts on japan. do you think we will see further stimulus from the bank of japan? bob: i think we will. just to put the qe into context, if they succeed in getting the balance sheet of 85% of gdp of the middle of next year, in comparison, the fed balance sheet is 35% of u.s. gdp. for the japanese are doing is more relative to the size of gdp, it is more than double the qe that the fed has done in a relative term.
it is very significant. that is proving successful in keeping 10-year yields below 40 basis points. i think also one needs emphasize the positive impact on the japanese economy from low energy prices. low oil prices are a strong stimulus for the japanese economy. so, a combination of weeak yen, qe, and low commodity prices -- the possibility of recession is very low. i think as we go into early 2016, we're going to see an uptrend in the japanese economy, north of 1.5% growth. now, that is not great. but it is better than where they came from. have a surprise that is good for japan. guy: there is a nice piece on the website, tim is here. talking about the greek crisis and whether glencore is worse?
tim: believe it or not, glencore has been a bigger shock. for a number of surprising reasons, it is surprising to look at the market value lost in glencore's september -- greater than all the greek banks during the crisis. the volatility of glencore shares during the month was greater than the volatility in the greek banks during their summer. and the options market expected the volatility to continue. anna: we saw the beginning of this week, when you see headlines this a momentum was to blame for the glencore flash crash, did that summit real business? bob: i don't think that means anything at all. the reality is very straightforward. what is a correlation between glencore and commodity prices is close to 100%. anna: 30% worse on monday. bob: but you have a natural
volatility and glencore's share price, i do not know to what extent their shares are borrowed, but i'm assuming there has been significant shorting of those shares. also, one has to emphasize the correlation between glencore's share price and data coming out rf china and invest io confidence is very high indeed. the shares are very liquid. if you want to find a proxy for commodity prices staying low, then you short glencore. guy: a lot of debt. bob: that is a good point, the big losers are people who are overleveraged. guy: they have gone hand in hand of late. the greek system would say it is systemic? the be viewed in store -- could we view glenn store as systemic? tim: the market is very large, there's some new players in.
a lot of counterparty risk, but definitely not big enough. the commodity markets are nowhere near as big. guy: this cannot be a lehman moment because of the fact there is that correlation to the rest of the economy. tim: you would not think so. but let us remember, there is incredible volatility in glencore shares. but no one is saying we are not trading with them, no one is worried about counterparty risk. continue to be investment grade, we will see how long they continue that. there is some risk. anna: the positive from the weaker commodity prices? bob: the winners clearly are commodity consumers. and i think one feature of the corporate earnings season is going to come out over the next month or so is we are going to have very good corporate earnings numbers from companies where their input costs are down because commodity rises are down.
and the airline sector, which i have historically never liked, is one example. jet fuel prices are down very sharply, indeed. industrial companies which consumed industrial metals, copper for example trading close to $5,000 per ton. two years ago, they were trading $8,000 per ton. companies in those sectors, as commodity consumers, for the numbers would be very good. conversely, you will see commodity linked companies, the earnings numbers are going to be poor. the energy sector, i think, is not going to recover in terms of corporate earnings result. it is a huge divergence between the winners and losers over the next few months. bounceback,ncore how has that -- is that a reduction of reality or an oversold position? does the market suddenly believe ivan? tim: it will not suddenly go to zero. but nothing goes in a straight
line. you know, clearly, people probably were shorting the stock. keep in mind, it fell 30% in september alone. that is a massive move, even after the recent recovery. anna: you buy anything commodities related right now, bob? bob: no, commodity prices are generally forming a base at the moment. for example, there is a high probability that it will trade between 40-60 for the next year. i think copper does not trade much through $5,000 per ton. but if commodity prices consolidate at current levels, the earnings outlook for the commodity sector has been dire. it remains dire. anna: bob parker stays with us. tim from our website team. guy: coming up, chinese markets are closed. but still ripping through the market, we will bring you the latest on the golden week data.
morgan stanley saying there is work for the commodity markets. think europeane equity markets are going to open on the first day of the fourth quarter. 1.3 across the board for the main markets. i am hearing vw is going to be on the front foot again. fourthf 1% start for the quarter for european equity markets. anna: data out of china, stabilizing. we have golden week holiday longg place, a week holiday. the chinese out of the market for a few days. guy: the question of the day is this. third quarter not great along the markets. commodities markets, equities markets. are you anticipating the fourth quarter will be any better?
anna: china and hong kong markets close for a holiday but the rest of asia is trading. shery ann has details. shery: two days of gains. disappointing data on business sentiment, showing confidence manufacturing is down to 12 in the third quarter, down from team. factory output data showing industrial production rose 0.3%. export numbers, a slowdown. trop ateeing exports 0.8%. the positive sentiment across
asia coming from china. ets closed. still, manufacturing data showing pmi is starting to stabilize. 49.8% ind to september. contracting but some stabilization. also beating pmi estimates. the only red spot is new zealand, down 0.1% to read mostly drag it down by sea energy. energy. rising 1.8 percent. calls forring growing the central bank to cut interest rates. because of how much they export
data,na, after the pmi look at this. around 9:00 hong kong time, we saw a spike. the japanese yen going in the opposite direction as demand for safe heavens decreases with some signs of stabilization in china. forjapanese yen weakening the second consecutive day. we heard from a former boj deputy governor saying the economy needs for the stimulus. back to you. guy: thank you. shery ahn joining us from hong kong reedit anna: business confidence in japan is waning. there is growing concern that the economy may have contracted in the quarter that has just ended. let's speak to our correspondent in tokyo. what is driving the lower
confidence among the big manufacturing companies in japan? we spoke to a guest who doesn't think this was such a gloomy reading. james: we saw yesterday production data come output was down in japan. as a result of that, a lot of people are cutting their forecast for the third quarter. japaneseoday manufacturers are less than about the economy going forward than they were three months ago. it is a reflection of partly the same reason a cut production in august. we can defenses -- week domestic spending. , because of the explosion in tianjin in august. he is correct to say when he
says other sectors, the nonmanufacturing sectors of the economy were stronger. large manufacturers, services, real estate, those sectors were stronger in japan. big push in the economy. the outlook for those companies is not good. guy: where does it lead to the economic plan? james: taking this back from the abe has been in power for a living quarters. is going into recession, as a lot of people are forecasting, that means it will have contracted for five of
11 quarters when he was in power. down to readand the medium-term, he said he was the economy and put japan on a stable trajectory. real gdp rolled. that would lead to the ending of deflation. hasdeflation malaise that afflicted japan. we are not seeing that. there is growth and then the economy goes back to recession. there was inflation and now recession has gone away. you are not see me stable economy abe said he wanted to achieve. will further stimulus fix the problem? interesting question. they are fighting big global trends. one of the options for the government and boj? : they could have a
supplementary budget. years go by without japan having to have an extra budget for some reason or another. that is a sign of how weak the economy is. they say, we need to spend more just to make the economy. advisers say the economy is going to need between 3-5,000,000,000,000 yen of fiscal spending. another option is to increase fiscal stimulus. they have auditory policy meetings. -- monetary policy meetings. about a third of the economist say they will have to increase stimulus because inflation is not where they need it to be. options.the two whether it will be effective, it may be in the short-term. notthose policies are effective in putting japan in a stable economic situation.
guy: they key very much. james, joining us from tokyo. the europeanook at data. manufacturing numbers from the eurozone. reading offirst spanish manufacturing pmi. and then data from italy. and then a final reading of the eurozone manufacturing pmi. guy: what to the data come out. what he is going to be thinking to himself. >> i hope he is going to be pleased. i think we have seen an improvement in eurozone pmi's. that is not some rising, given the volume of stimulus thrown at the eurozone. whether the devaluation is actually boosting exports very well. growthe seeing export enough. we have zero interest rates for
the foreseeable future. bank lending slowly picking up. bond yields less than 60 basis points. credit spreads are tight. there has been zero followed from greece. there has not been any contagion risk. plus, as we were talking about, from japan and china, low commodity prices are positive for the eurozone economy. we have clear accelerators in europe, germany and spain. i would emphasize the turnaround, the successful turnaround we have seen in the spanish economy. we have some of the smaller economies like ireland which are growing very strongly indeed. we still got, if you at all of up, the situation is not that satisfactory. europe is accelerating from 1% growth to perhaps one point five
or 1.7% growth. the numbers are ok. we're not looking at growth which is that exciting. anna: the european union trying to revamp capital markets. bob: we have the announcement yesterday. anna: they are trying to get more credit flowing to businesses that need it does that hold great hope for you? bob: a long, drawnout slow ross is. -- process. there are some areas where i think the year union is making mistakes. one important segment, the insurance sector covered by solvency rules, they are encouraged to invest in infrastructure. they are discouraged from investing in securitized products. there are areas frankly on the proposals for the capital markets union which i think are
a step in the right direction. but there is a lot of work to be done in certain areas where frankly i think they are making mistakes. guy: i think it is very interesting, you have a graph on the eye tracks crossover. -tracks crossover. perfect correlation between equity yields. if you look behind the widening of spreads, the high-yield spread widened to 540 basis points. only 300go, it was basis points. if you look at non-commodity sectors, the spreads have been
the index fell to 12 from 15. adding to the bad news, concern is that the economy has contracted in the quarter that has just ended which would tip the nation back into recession. guy: a report shows jack dorsey will be the twitter ceo. anna: global growth will only increase as the u.s. grapples with the rate hike. delicate task of moving to a new growth model. >> china is in the midst of a fundamental and welcome transformation. one which has an expected by many. it has launched deep structural
reforms to lift living standards. design,forms will, by of slower,ew normal safer, more sustainable growth. the policymakers are facing a delicate haunting act. they need to implement difficult reforms which they have embarked upon. we have the political determination to stay the course. well if the same time preserving demand and financial stability. investors were worried about the speed at which the economy was slowing. these put further pressure on commodities markets and triggered currency depreciation's, particularly in latin america. less is going to purchase
commodities. this will, in our view, contribute to what could very well be a prolonged time of commodity prices which will be lower. guy: let's stay with china. an agreement between the u.s. and china on cyber security is being viewed as a significant step forward. our next guest believes if the quote good guys shared intel as well as the hackers, everyone would he better off. officer at security a company. good morning. what you make of the deal? the chinese and u.s. just struck. guest: the fact that it happening is a good thing. we have been talking past each other. the fact that we agreed to come to the table and take into this
topic is good. there are a lot of pessimists anna: what is the role of government versus rogue individuals? guest: there are a lot of individual attackers many years ago. ofhave done quite a good job forcing the individual attackers out. unfortunately, they have been replaced by the organized groups. nationstates. organized crime or well structured center groups. they are more sophisticated. they are persistent. much more difficult for us to deal with. guy: if i am a company, do i feel safer? i am happy we are talking but do but do i feel-
safer? evidence. sufficient you need to be vigilant and do all the things as an we aretional community talking about. i don't see any relief in sight in your time. anybody done any work on what the economic costs are? in the final analysis, how much does this cost the global economy? guest: i am not sure we know. there have been some studies to find out what this may cost. the problem we have, a lot of organizations will not share this information. it potentially impacts their brand so many companies will not report if they have had a loss or theft. there is a big part of the data set that is missing today.
i don't think we know just yet. anna: is that the information sharing you would like to do? guest: what we are proposing is information sharing that would allow another organ nation to detect and event an attack. information about the call indicators of compromise. this is very relevant timely information. had today, that information is made available, often times weeks and months later. if i see an attack this evening, i need to characterize that, get that to peers. sharing technical information in a matter of minutes and hours as opposed to today's practice of sharing information and weeks and. anna: it is that common?
you go after a business and then another into a similar way. guest: we need to drive their cost up. you talk about a zero day attack, they can use it many times if we are not sharing information. if we can characterize that attack weekly, should that information, the next time they use the attack and fail, now they are going to go back to the drawing board and reinvest. signature, a bigger bigger target every the international community has a better chance of seeing them. curve?at is your cost ge ofis the average ai someone looking for a job? isst: the inflation rate high because there is a lack of experienced people. they can command a much higher salaries.
from an age distribution, it varies. we were talking, privacy, in the past, we would have to hire a young hacker, so to speak. i don't think that is true any longer. the universities and corporations are producing some high-quality cyber talent. now we are seeing a range of, in some cases, young and out of school. but there are a lot of good experienced people. they have been in the corporate world for 10-20 years and are valuable. that dynamic has changed. problem is, we still have a deficit in trained security professionals. we are competing for the best of the best. anna: you have military and government experience. how did that equip you and your business'? the government has been
in this fight for quite some time. under the number a lot of information warfare, they have been working at this for a long time. there are a number of professionals with operational experience. i am reaching out, back into the prior cyber commanders and bringing them into the company. they have direct mission experience. it under their fingernails. -- dirt under their fingernails. >> or toast crumbs. we have spent the time talking about what is happening in syria. can you balance those stories? when we think about cyber and conflict, how should we perceive talks about war. is that the right way of looking at it? guest: it really is. similar, broad sweeping implications and a cyber attack can be the lead to something
that translates to the physical dimension. i think we have to treat it as an extremely important component of what we have been defining as war. i often talk about principles of warfare which every nation has had for hundreds of years. i'm trying to remind ourselves, thes not lose sight of principles of warfare. they apply even in the cyber dimension area there is a lot to be learned from the principles of war we can translate to the cyber war. an: let's tie this into investment team. many years ago, one would have looked at defense sector. now the security sector, security is cyber security. it is a very clear durable investment team. anna: thank you. great to see you. and brian, thank you for coming
it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. london.0 in here are the stories you need to know. anna: the official index in china, 49 and eight inset number. point eight in september. exchanges are closed for a holiday. guy: a survey from the central the economy may have contracted in the quarter that just ended that would put japan back into recession. to nameitter is set
jack dorsey as its ceo. 5% forgained more than an announcement that could come as early as today. it does not think it is going to sell for as much as originally thought. what can we expect now? has the details. caroline: a cheaper price point. this is the ipo. because the market, destabilization, the negative auto sector headlines in particular, this unit services the auto sector. they are having to rain back there ambition. instead of raising 2.5 billion euros, they will be raising 1.5 s.llion euros re -- they are
seriously raining back the price point as demand has been weekend. there were reports that they were going to be under review because of the situation any market. they say they have significantly deteriorated since september 21 overall. clearly, the destabilization not only coming from the market route this last quarter but also love vw scandal and the impact that has had on the german auto sector in particular. headlines crimping demand. that is going to be hitting later today. they say they will be raising capital, contributing more capital to mitigate the lack of share sales a are raising. guy: makes you wonder why they are selling it at all. hong kong closing for golden
week. let's head to the close with shery ahn. some: let's look at currencies and asia. the australian dollar strengthening, the japanese yen weakening after chinese pmi manufacturing came around. australia, raw materials sent to china. the biggest export market gaining half a percent. the japanese yen, weakening for day after consecutive showing some signs of stability in china with the manufacturing pmi rising to 49 when it did september. -- 49.8 in september. the yen has seen some strength lately but we are seeing two sessions of weakness. let's take a look at what we are watching in the japanese market. they close 1.9% higher today.
rising the big movers 5.8%. the retail chain of used cars. announce first half profit rose. auto parts supplier who supplies to volkswagen. they took a hit when the scandal broke but they are rising 4%. they are saying they will take stakes in overseas units. rising 4% after announcing profit. down 3.3% after more analysts said as they overplayed for american spirit. trading for the first time of the nikkei 22 five. we are seeing some selling because of surges after nikkei made the announcement last month.
thank you. let's look at where we are expected to open for europe in equity markets. a combination of gloomy day in japan, but some stabilizing data out of china. maybe there are some bargains to be found. let's see where we are seeing is opening. -- futures opening. the dax, maybe 1.2% higher. it's like according to the calculations on the terminal, we are going to be seen a positive open for european equities. on a: she warned her that france -- for more on the continued woes, we are joined in frankfurt.
pressure is intensifying. which of the countries that are currently taking a closer look at vw? it is france, spain, and sweden. they are looking at whether they want to claw back subsidies. france's economy minister announced further details of potential investigations that onealso spread to peugeot, of the local carmakers. volkswagen is the only one that has announced. we are having a fire drill in frankfurt. anna: we should let him get on with that. thank you for joining us. we will find out and maybe update you. the markets, dollar appreciation since 2012 is impacting
earnings. a chief investment strategist joins us. >> it is going to put a lot of stress on the u.s. earnings. think ishat we driving me slowdown. not the type of trigger you normally get into with a bear market. that is good news and bad news. and a: does the dollar rally continue? the dollar could go 25% higher over the next three years. >> when you look at the history, u.s. dollar appreciating in five years, that was enough to stress the economy. so far, we have only gone up about 40% to read in the short run, when you look at some of the activity, we can see the u.s. slowing.
europe slowing. going into the fourth quarter, you can see the dollar coming off which could give a bit of a lift to the markets short-term. guy: the dollar is going to go down. that does not sound like a safe -- >> you will have good opportunities in europe. in the short term, what we have seen when the euro has gone up, that has been positive for european equities. longer-term, the core european expert machine, that leaves the weaker euro. and the stronger dollar. is a double edged sword in many ways. the fx influence has come down over the last few years. anna: you see this as a correction, not a bear market. >> we went negative in global markets back in may.
we thought it would be a downside rather than an out and out there. occur when interest rates go up and unemployment's rise. what we want to see, we think this is an opportunity to buy. zoneve up rated the euro relative to the u.s. if you see more of the dollar week this, you typically been careermodity strength that could reverse some of the stocks.hocks -- a similar environment to q2. slightly trickier for markets. activity was slowing in the states. bond yields rose. people did not know how to interpret that. onfusing picture. guy: some of that will be used to buy back stock. they buy back stock is,
are jogging interest rates lower, not raising them. all the time u.s. growth is just a liberating, we are unlikely to see the fed arrays to read we think the fed will not raise until 2016. corporate's are incentivized to behave like a bonds. they are trying to look like bond proxies. we think that will be out there. all the time you have the hiatus, the uncertainty, credit tends to be stressed. default you worry about risk? a decision draw between general high-yield and energy companies. >> our sense is they have less than a 10% ability of a u.s. recession. when you look at the unemployment market, a range of leading indicators, the yield curve normally flattens dramatically before a u.s. recession happens. we haven't got no signals.
we would say that stress is being overhyped and it is sector specific on the oil play. guy: where does the fed's take us? how high do they go? >> we think they will hold off for some time yet. they will want to see economic activity rising. they have got a maximum employment mandate and that is the focus. they will let the dollar do some of the tightening for them. na: thank you. guy: 20 minutes from the market opening. we will look at the themes driving trading. bw and focus again. the first day of the quarter. how that story is going to develop from here. ♪
anna: welcome back. guy: the stabilizer at 83 year low in china. gaining.e kong closed for a holiday, golden week. anna: confidence falling in japan. in index fell to 12 september from 15 in june. adding to the bad news, concern that the economy may have contracted, which would set the nation back into recession. guy: speculation is growing that the twitter board is set to name jack dorsey as the permanent ceo. anna: let's get caroline hyde at the market desk for stocks that
could be on the move. caroline: a phenomenal rally in europe, 2.5% higher. trimming the appalling third quarter. 1.5%. see, we are drawing gains of 1% on the dax. there is one stock we need to keep an eye on. have a look at the construction been.jecture has of all told rise. we have seen it sinking in recent weeks. the initials share sale, the spinoff of the plastics unit, could be smaller than hold. -- hoped. this is their plastics unit. incident of 2.5 billion euros, we understand the share sale will raise 1.5 billion euros. they have to plug that cap with
capital to mitigate the reduction of the ip o proceeds. they are trimming into back. the price up to 35.5. the reason, negative headlines. market disruption. the deterioration has been significant. volatility in the capital market and the negative headlines surrounding the sector. the scandal and developing more and more stocks. the plastics unit does call the auto unit one of its customers. watch out for bayer. another stock, it has been battered over the past to 12 months. a renewable energy cubby in spain. showing up the balance sheet clean bond related to power projects. the first one ever in spain. they have a raised more than a quarter million euros to
refinance some of the thermal power plant. that is going to be reassuring some investors. they could see the stock move higher. anna: thank you. what do you say to the bayer ceo? >> it is interesting they did not pull it. is theyresting thing think the stress in the auto sector is going to get worse. i would have thought there was opportunity to delay it. we think those stocks are going to go higher in the next quarter. perhaps that is a good opportunity. so a temporary glitch rather than bigger and more worrying. would feel this is a temporary hiatus.
that is our big thing. this is just a financially repressed world creating a repressed economic cycle. anna: i thought unemployment often lags cycles. ian: it is only once the rise starts to get to going. that is a sense that corporations are getting stressed, they are earnings are under stress. that is one valuations get challenged in a fundamental way. particularly when there is up holocene rise. --there is guy: how do i outperform in these markets? ian: our senses you have to have
the to to to give you -- strategic review. guy: who was making money? ian: governments. they are happy to refinance. the way equity investors take advantage is the yield plays. that is why the strategic call is defensively bullish. technically coming you have to be agile. when you see these rotations, you have to take advantage of them. by being out of the market, you would have saved yourself a lot of stress. coming back again, we think you 300 be able to eke out that or 400 basis points. anna: what do you think of the m&a cycle?
absolute levelhe is high, as a percentage of market capitalization, it remains low. previous all market peaks have capitalization. we are running around or percent. we you have another leg to come before we get the big sell signal. guy: how long is this cycle going to last? ian: what we are seeing is an extended signal. real interest rates are at minus two. when you saw the last week cycle, it took about 10 years to clear the debt. we are going to extend the cycle. we think there is another 2-3 years before there is a sick of against selloff. and 1967-73, after
the last big debt cycle, maybe this is going to be longer than that. anna: i talked to someone who said, if you keep predicting recessions, you will be right at some point. ian: our job is to get the ups and downs. the best signal is when unemployment goes down slowly. it comes up rapidly. you want to be bullish for six or seven years. and then spend two years being bearish. guy: which data are we watching? spanish pmi's. data from italy. we aggravate it all together at 9:00 u.k. time.
the eurozone manufacturing pmi. ofutes away from the start the european equity trading day. and then on the move is next. pmi,oking at a manufacturing confidence. you ask what the policy responses going to be and everybody looks ahead to the meeting october 30. what do they do next? the answer is coming from what is happening in china. is the feedback in japan just beginning? a little later, we will be talking about emerging markets and the dollar. it has been brutal, nowhere to hide. every asset class has taken a beating. whothen we will talk about will be the ceo. i think we might already know.
the top of the hour. just minutes to go. guy: looking like a positive start to the third or fourth quarter. in terms of what we are looking at, here is the fair value the bloomberg terminal gives us. 1.3% up on most of the main markets. up by 1.2%. aggregate that into the euro stocks, a 1.3% or 1.4% open. closed, golden week oliday in china. stabilizing pmi data. guy: may be good news, maybe bad
news. stabilization but not at a great level. i guess you have to stabilize somewhat red and: adding to the mix. we had the gloomy reading. businesses not confidence to invest to any great degree, but it did to ignite the talk about stimulus. -- we watchedatch a professor earlier saying, don't worry about it. that is it from "countdown." is still to come on bloomberg television. anna: we will leave it with jonathan ferro. see you tomorrow. ♪
jonathan: good morning and welcome to "on the move." i live in london. we are moments away from the start of european trading. goodbye to the third quarter and hello fourth. stopping the rot -- china's official factory gauge stabilizes around the three-year low. stimulus measures show signs of getting traction. japan stutters. largeence among manufacturers falls. and twitter spikes -- shares jump as speculation mounts that the cofounder will be named permanent ceo as early as today. 20 seconds away from the open. futures up i-93 points, dax up
by over 112 point. let's get straight to your market open. caroline hyde is standing by. caroline: we will take what we are given when it comes to china. they are stabilizing and a three-year low. but we like it. we like the fact that we are seeing stabilization, the fact that we are starting to see some improvement. still in contraction, still starting tot we are see some of those measures, not one, not two, but five rate cut. potentially the starting to stabilize the chinese economy, helping to push equities higher, risk appetite higher. we are following asia. what a rally we saw into the end of the quarter, up 2.5%, after what was the worst quarter and four years. ftse and cac up e